Final presentation

Joint Presentation ETHZ- LUMS
The Social Impacts of the Crisis in Europe

Copyright ©2008 ShARE. All Rights Reserved

THE IMPACT OF THE CRISIS
ON EUROPEAN COMPANIES
Tristan Guigue

Copyright ©2008 ShARE. All Rights Reserved 2

General Outlook

 Latest data covering the end of 2008 and January and February 2009 show that
EU labour markets are starting to react more strongly to the current economic
downturn, as recently released data confirm that the EU has entered recession
following a marked decline in GDP (by 1.5%) in the fourth quarter of 2008.

 Companies have announced substantial job reductions in several sectors in
recent months, while business and consumer confidence, job vacancies and
firms' employment expectations have generally continued to fall.

 However the deterioration in economic sentiment appears less pronounced in
February than in previous months, and there are even tentative signs of
stabilisation in confidence in retail and financial services together with an
improvement in employment expectations in the months ahead in these
sectors.
Source: Monthly monitor report of the European Commission


By Sectors and Countries

 The manufacturing, financial services and transport and communication
sectors have been hit hardest by announced job reductions in January and
February.
• However, the hotels and restaurants and quarrying sectors announced more job
creation than job losses in February, while the retail sector still showed signs of
resilience although posting considerably fewer job gains than in the previous
month.

 Compared with a year ago, unemployment rates have risen in the majority of
EU Member States, with the most substantial rises being in the Baltic States,
Spain and Ireland. Only four Member States still had lower unemployment rates
compared to a year ago, namely Bulgaria, Slovakia, Germany and Poland.

 Young people more affected than experienced people.

 Men affected more than Women.


Hiring and Restructuring Trends

 Hiring intentions for the first quarter of 2009 have generally worsened, down 2
to 9 %

 Overall, between last October and the end of February, 770 restructuring cases
were reported, with two-thirds of the announced job cuts taking place in just
five Member States, namely the UK (143 000), Poland (43 000), Germany (28
000), Italy (19 000) and the Czech Republic (19 000)

 In February the largest restructuring cases involving job losses were in:
• financial services: Royal Bank of Scotland (22 300 jobs) and RSA (1 200) in
the UK, ING (2 700) in the Netherlands, HypoVereinsbank (2 500) in Germany
and PZU (1 500) in Poland;
• manufacturing: Bumar Labedy (1 600) in Poland, Harman/Becker (1 000) in
Germany;
• retail: Stylo (2 500) in the UK;
• transport and communication: Poczta Polska (1 500) in Poland, SR Technics
(1 135) in Ireland.


European Companies Situation – Job losses


Management of Crisis within Companies

Each company has different way to handle the crisis but there are some
common rules given by the European Commission :

 Inform and consult the workers about the economic and social situation and future prospects.
Inform and consult the workers in special procedures where collective layoffs or transfers are
envisaged

 Make sure the workers’ rights are protected

 Involve the workers
• Make the company’s situation and strategy understood
• Explain and give the reasons for change in good time
• Allow workers to make their views known

 Manage the restructuring process
• Look for alternatives to dismissals
• Establish a social plan to alleviate the social consequences
• Establish monitoring mechanisms

 Take care of the future
• Anticipate as far as possible the evolution of jobs
• Maintain and develop workers’ competences
Source: Department Social Affairs of the European Commission

UNEMPLOYMENT SYSTEMS
Elisa Park
Rafaël Klein


Unemployment in France, Germany and Switzerland

Labor force statistics for the three countries with OECD data

Source : OECD Statistic website consulted on 04.01.2009



Unemployment rates - France

It remains one of the highest in Europe. The current
Government is experiencing the Revenu de solidarité
active.

Unemployment was already on the rise before
the financial crisis heightened. Data showing a jump in
the number of jobless people in August.

There could be as many as 52,000 jobs lost during the
second semester of 2008, increasing the
unemployment rate to 7.4% by the end of the year.



Unemployment rates - Germany

Due to the crisis, the German government bailed out
Hypo Real Estate.

In early December German Finance Minister Peer
Steinbrück indicated that he does not believe in a
"Great Rescue Plan" and indicated reluctance to
spend more money addressing the crisis.



Unemployment rates - Switzerland

Switzerland has a more flexible job market than
neighboring countries and the unemployment rate is
very low.

However, the effects of the worldwide economic
slowdown have become evident on the Swiss labour
market . This is shown on the unemployment level
recorded by employment offices .

This particularly – although not only – applies to
the sectors of the economy which are largely
dependent on exports.


Situation in Germany


Full service provided by Germany’s biggest public
agency

German government gives very high Agency offers the whole range of services for
importance to the unemployment agency unemployed under a unified framework

 Allocation of financial aid

 Consulting and Mediation:
• Free consulting by agency staff
• Created in 1927 during the Weimar
• Service partly available in Turkish
Republic
• Bigger restructuring and renaming in
2002 as result of unemployment policy  Self-information sources:
reforms • Employment Information Centre (BiZ)
• Centralized (federal) organisation • BERUFENET: Database with job-
• ca. 98.000 employees offers, linked to external (private)
databases
• 660 branches and vast internet offer
• KURSNET: Database with formation &
• Budget: €43,7 billions (2007)
continuing education offers
• Ongoing discussions in public & politics

 Other services:
• Psychological & medical service
• Service unit for job-seeking abroad
(especially within EU)
Source: Bundesagentur für Arbeit, Bundesministerium für Arbeit und Soziales


Two main approaches to help unemployed people
to find a new job

 Employees are obligated to register at the agency at
least 3 months before termination of a job:
Information, • Meeting with agency staff mandatory
Consulting • Active search for new job mandatory
&
Mediation  Agency units for specific sectors:
• Consulting units for artists, academics, seamen etc.
• Agencies directly located in many universities

 Free formation/ongoing education is granted after
receiving “Education Voucher” (Bildungsgutschein):
Formation • Early formation-consulting with agency staff
& mandatory
Ongoing • Agency inspects the need for formation (profile
education screening, psychological test and other sources
helping to define requirement)
• Education Voucher on top of financial aid

Source: Bundesagentur für Arbeit, Merkblätter


Situation in France


After decades of a clustered unemployment system
establishment of a new single agency in France

One of the new French president’s first reform Agency in progress of consolidating
to unify clustered agency system all services into a unified framework


• Free consulting by agency staff

• Created in late 2008 after merging  Self-information sources:
ANPE and Unédic/Assédic networks • En Ligne Pour l’Emploi : Internet chats
• Further merger with AFPA formation with companies and agency staff
agency in progress
• Centralized (national) organisation  Other services:
• ca. 45.000 employees • Unemployment Card to get discounts
• Budget: €2,6 billions (2006, ANPE) (like students)
• New, unified service for unemployed

Source: Pôle emploi, Ministère du Travail, des relations sociales, de la famille, de la solidarité et de la ville


Still clustered and opaque approaches to help
unemployed people to find a new job

 Registration as unemployed at Assédic:
Information, • Meeting with agency staff mandatory
Consulting • Active search for new job mandatory
& • Obligation to deal with job offers corresponding to
personal profile
Mediation

 Handled by AFPA agency:
• Formation-consulting and validation by Pôle Emploi
Formation staff mandatory to get redirected to AFPA
& • Subsequent interview with AFPA staff mandatory
Ongoing • Part of Personalized Action Project (CRP, PAP)

education
 For 16 to 25 year olds:
• Free 1-2 year formation without any prerequisites to
enter public service (PACTE)
Source: Pôle emploi, Assédic, Association nationale pour la formation professionnelle des adultes


Situation in Switzerland


Umbrella organisation simplifies federal system

Regional agencies as part of Agency is service mediator,
clustered organisational structure instead of service provider


• Federal umbrella organisation (SECO) • Free consulting by agency staff
with regional subsidiaries (RAV) • Biggest job database in Switzerland
• 130 branches
• ca. 2.500 employees  Self-information sources:
• Budget: €270 millions • Self Service Terminals in RAV braches

 Formation & Ongoing education:
• Mediation of formation
• Internships
• ”Learning-by-doing Placements”
• “Motivation Term”

Source: SECO - Direktion für Arbeit, RAV


AN INTERNATIONAL SOCIAL
CHALLENGE
Adriano Waszyc
Réda Rebib

General Outlook

Keynesian approach

• Solution through investment and consumption
• Through industry – France
• Through demand increase – UK

Stimuli package

• Short run – managing investments
• Long run – maturing on innovative industry

Protectionism

• The temptation is to follow protective measures
• But freetrade is the only real solution
• Remember protectionism didn’t help at all for the 30s’ crisis…

Sources: Capital & Bilan magazine, International Herald Tribune


How is western industry performing?

Situation
• Western Europe second biggest industry pole
• More and more relocations:
• Eastern Europe
• North Africa
• East, South-East, South Asia

Strengths
• High quantity of qualified workforce
• Closer to universitarian networks & star-up nests
• Free trade within Europe
• Closer to costumers

Weeknesses
• Expensive!
• Can only strive thanks to major economies of scale or highly specialized
products
• Often highly overcapacity issues


New challenges

Somehow the issues are still the same… Question are:
• How to remain competitive?
• How to increase productivity?
• How to attract industries?

• But crisis accentuated contrasts between European countries
themselves and also the rest of the world.

Despite geopolitical disparities, current strategies:
• Monetary policies
• Fiscal incentives
• Government steered investments

Outcomes are uncertain
• Consumer consumption, will it increase or will people start saving?
• Since Europe is a replacement economy, consumption can only be based
on innovation.
• How to manage the ever growing national debt?


Bank Secret: Switzerland

 Helping rich individuals to evade tax payment is the Swiss
finance markets’ real specialty.

 Switzerland is the world leader in “offshore private banking” –
private banking outside the clients’ country of residence.

 Swiss banks, or rather increasingly branches of foreign banks
in Switzerland, manage about a third of the wealth in this bank
sector worldwide. This is more than 2000 billion francs, with a
yearly growth rate estimated at 6 to 6.5 percent.

Source: Swiss Government


Bank Secret: What happened recently?

 In February UBS has to give 300 names of wealthy US clients to
the US fiscal authority.

 Mid march the Swiss government decided not to make anymore
the distinction between Tax Evasion and Tax Fraud

 Basically nothing coarse changed to the Bank Secret Principle.
The main changes apply to wealthy foreign people trying to
escape their home country tax system.


Bank Secret: Impact on a social level

 The Swiss finance industry employs about 1.4% of the people
in Switzerland and represents 12% of the Swiss GDP.

 Private Bankers in Switzerland fears that the new law, making
Tax Evasion and Tax Fraud the same, could dry up the off-
shore wealth investments in Swiss Banks.

 This could have a direct impact on Jobs in this field and Swiss
economy.

 A solution to keep Switzerland a prime investment place is to
stress the service quality and the political stability. Strengths
which have already been emphasized for decades.
Source: FinancialWeek, February 24.


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